Consumption institutions.

Consumption is primarily an institutional activity. Social economists would generally agree that a variety of institutions contribute to an individual's consumption decisions. For example, institutions guide or constrain choices when a consumer observes dress codes, religious beliefs, or legal regulations in making decisions. How can we understand these consumption institutions, and consumption in light of these institutions?

It is well known that the neoclassical theory of choice considers the individual as an isolated entity and neglects the role of social institutions on the formation of wants and consumption decisions (McPherson 1983). The pioneering work in the analysis of consumption institutions is Thorstein Veblen's The Theory of the Leisure Class. Veblen's influential critique of the leisure class and novel insights into such phenomena as "conspicuous consumption" laid the foundations for the institutional and also other analysis of the consumption process. Though still influential, Veblen's approach has also been recently criticized as being theoretically incoherent and inapplicable for understanding consumption behavior in contemporary societies (McIntyre 1992; Campbell 1994).

This paper has two objectives. The first is to show that both the neoclassical and the Veblenian approaches have been restrictive in the analysis of consumption institutions and that the restrictions of both approaches result from a methodological commitment to modernist dichotomies. The neoclassical approach commits to a dichotomy between the subjective and the objective, which amounts to placing the role of consumption institutions in the category of subjective givens that cannot be analyzed scientifically. Similarly, whereas Veblen and his followers have long criticized the neoclassical approach on other fronts and viewed consumption behavior as conditioned by social institutions, a parallel dichotomy prevails in Veblen's approach to consumption which amounts to preventing a complete analysis of consumption institutions. Veblen distinguished between the technological and ceremonial varieties of consumption, corresponding to a modernist dichotomy between the natural and the artificial, which gives priority to the technological and restricts the analysis of consumption institutions to the category of the ceremonial. These different but parallel modernist dichotomies prevailing in the neoclassical and Veblenian approaches have precluded adequate analysis of consumption institutions.

The second objective is to provide an alternative framework that seeks to escape the bounds of such dichotomies by interpreting consumption as speech and by focusing on the role of institutions in facilitating the communication of individuals through consumption. Two existing perspectives are utilized in constructing this framework. One is the view of goods as a system of communication (Douglas and Isherwood 1979). The other is the rhetorical perspective to communication. I combine insights from these perspectives to develop an analogy between speech and consumption and contribute an institutional dimension by exploring the parallels between the institutions of speech and consumption.

CONSUMPTION INSTITUTIONS

Because "consumption institutions" is not a commonly used term, a clarification might be in order. Although the word institution might be used in various ways to emphasize different aspects, virtually all views of institutions share broad agreement around the notion of rule-following behavior. Similarly, consumption institutions are considered here as reflecting socially constructed systems of rules that generate regularities in people's consumption behavior. They range from the regulation of private consumption patterns by such spontaneous orders as fads to joint consumption patterns by such conscious designs as a dinner party. Whereas some are simple norms that regulate table manners, others are complex rules and behavioral patterns that are embedded in custom, tradition, and the legal system. Individuals choose consumption items in light of both the constraints and the assistance that these institutions provide.

More specific examples can illustrate the way institutions regulate individual consumption. Not the individual, in fact, but the family or the public is the unit of consumption for some items such as a house or a park, accompanied by rights of ownership defined accordingly by the legal system. For certain items, individuals might have private ownership fights, but the legal system might also have explicit rules and regulations governing their consumption, such as exactly how, when, and who can actually consume them (e.g., alcohol, medicine, guns). Moreover, individuals might sometimes surrender their ownership fights to others through gift-exchange or donations.

Institutions also regulate one's choices for personal consumption. For example, an individual's religious beliefs or other cultural rituals might dictate the consumption of (or abstention from) certain items on certain occasions (e.g., turkey for Thanksgiving, fasting during the month of Ramadan). Institutions might serve as a heuristic to choice, such as when one individual emulates another or follows the latest fashion. Similarly, one's choices might be guided by an adopted lifestyle, a political ideology, or a concern for status.

CONSUMPTION INSTITUTIONS IN ECONOMICS

How have economists sought to understand consumption institutions? It is well known that the institutional dimension of consumption has not received any systematic and explicit attention in the neoclassical analysis of choice. According to this theory, individuals choose in isolation, and the sequence of choice follows a preference-utility-demand path, with no explicit recognition of the role of social institutions. When institutional considerations are recognized, they are simply attributed to the formation of preferences, which are then taken as given and unproblematic.

Institutional economists, on the other hand, have placed institutions at the center of their analysis of consumption.(1) Veblen's The Theory of the Leisure Class, which is also the first major work in institutional economics, lays the foundations for the institutionalist theory of consumption. Veblen rejects the orthodox theory's conception of individual wants as being subjective and unknown givens. As Hamilton (1987: 1539) also notes, his theory of consumption is "in cultural, rather than individual, terms." Veblen's insights into the consumption process has had major influence that has reached beyond economics, also reflected in the widespread use of some of his novel concepts such as "conspicuous consumption" and "pecuniary emulation."

At the base of Veblen's approach to consumption lies a dichotomy between the technological (instrumental) and ceremonial (institutional) varieties of consumption, with a priority assigned to the technological. In drawing the distinction, Veblen uses the criterion of "whether [an expenditure] serves directly to enhance human life on the whole" (Veblen 1899: 99). He then views ceremonial consumption as being somehow artificial or at least less "useful" than the more fundamental technological consumption, examining ceremonial consumption around the notions of waste, emulation, and status concerns.

It is important to note, however, that Veblen's analysis of consumption pays an uneven attention to the two sides of the dichotomy. As Lower (1980: 93) notes, "Veblen's interest was focused on the development and institutional role of ... conspicuous waste, and he made little effort to expand upon his concept of instrumental consumption." The wide influence of Veblen's approach to consumption has also led much of the subsequent literature to retain this uneven attention to the two sides of the dichotomy.(2) As a result, Veblen's negative, critical approach towards ceremonial consumption has prevailed as the dominant attitude towards consumption activities as a whole, setting the tone for much of the later contributions to the understanding of consumption institutions by institutional and other economists.

Consider, for example, some of the recent work by institutional economists which seek to advance Veblen's insights by employing new developments in economics. A common strategy appears to be to use recent, and even mainstream, tools and theoretical concepts to investigate such Veblenian themes as emulation and status concerns.(3) For example, Dugger (1985) uses interdependent utility functions to develop a formal model of consumption externalities and to argue that more consumption can make consumers worse off. Similarly, Adams and McCormick (1992) use insights from the theory of clubs to examine the spread of fashions through emulation. These are certainly important attempts that go some distance towards explaining consumption institutions. But their primary focus on emulation and status concerns indicates that they, too, remain on only one side of the dichotomy, examining consumption behavior and institutions on that side.

It is interesting that Veblen seems to have indirectly set the agenda for some of the mainstream economists as well. His themes also dominate the works of those attempting to incorporate a social dimension to the neoclassical theories of consumption. Duesenbery's (1949) notion of "demonstration effects," Leibenstein's (1950) interpretation of "Veblen effects," and more recently Spence's (1974: Ch. 8) status signaling model, and Frank's (1985: Ch. 8) work on the effects of concern about relative standing are examples of the way Veblen's focus on emulation and social status have come to dominate thinking about consumption institutions.

Veblen's approach has not gone unchallenged, of course. For example, Mcintyre (1992: 56) argues that Veblen "effectively denied that all needs, even the most apparently original, are mediated by culture" (emphasis original). Veblen's work has also received forceful criticisms from other disciplines. For example, Douglas and Isherwood (1979: 4) argue from an anthropological perspective that Veblen "has much to answer for when we consider how widely his analysis of the leisure class is received and how influential has been his unqualified scorn of conspicuous consumption."(4) Similarly, Campbell (1994: 506) argues that Veblen's model "does not account for the dynamism that is so typical of modern consumption." Note that these criticisms are actually sympathetic to Veblen's overall project in the sense that they share a broad agreement about the social, cultural, and institutional constitution of consumption. They nevertheless find his approach inadequate.

Although Veblen's framework has been a more productive avenue for further research than the neoclassical theory, it has been able to produce only an incomplete account of consumption institutions. What has gone largely unnoticed is that the inadequacy of Veblen's approach actually results from the same methodological commitment that has prevented the neoclassical theory from addressing consumption institutions. As I will argue below, the problem lies at a deeper level, in the prevalence of modernist dichotomies that dominate both approaches.

MODERNIST DICHOTOMIES AND CONSUMPTION INSTITUTIONS

One of the expressions of modernism has been the project of seeking to divide the world into two halves by a sharp line of demarcation between what is considered as the "good" and the "bad" sides, and to favor one side of the line over the other (Booth 1974: 14-21). For example, as McCloskey (1985: 42) puts it, a modernist methodologist "divides all possible propositions about the world into objective and subjective, positive and normative, scientific and humanistic, hard and soft.... The scientist's job is ... to classify them into one or the other half, scientific or nonscientific, and to bring as many as possible into the scientific half." Similar well-known dichotomies prevail in modernism between fact and value, truth and opinion, and natural and artificial, the first of these oppositions typically being favored over the second.

What are the modernist dichotomies of Veblen and neoclassical economics, and in what ways have these dichotomies affected their approaches to consumption institutions? The dichotomy in neoclassical economics relevant to the study of consumption institutions is between the subjective and the objective. The dichotomy reduces consumption choices to a matter of a maximization problem with subjective preferences and objective constraints. Although one might consider the domain of subjective preferences as the proper starting point for studying consumption decisions, the modernism of the neoclassical theory has no room for such an inquiry. As McPherson (1983: 96) puts it, "mainstream economics has been shaped - and indeed defined - by the principle that the nature and origins of consumers' tastes and preferences lie outside the proper domain of economic inquiry."

The dichotomy not only divides the two domains, but it prefers one over the other. Because the subjective realm is considered as given and beyond the scope of analysis, the neoclassical theory focuses solely on objective prices and income to explain consumption behavior. In a classic statement of this position, Stigler and Becker (1977: 89) argue that such an approach has the advantage that "all changes in behavior are explained by changes in price and income, precisely the variables that organize and give power to economic analysis" (emphasis original).

Clearly, no productive inquiry into consumption institutions can be pursued within this framework. The framework excludes the analysis of these institutions in the subjective domain, even if one were tempted to do so. Pursuit of such issues as the institutional grounding of preferences are excluded simply as illegitimate areas of inquiry. On the other hand, consumption institutions do not fit into the domain of the objective either. Institutions include norms, customs, and conventions, which do not qualify for the designation of the objective reserved for such things as prices and quantities. Moreover, once the world is divided into two halves, neoclassical modernism does not leave room for a third option in which one can examine consumption institutions.

As noted earlier, dominating Veblen's approach to consumption is a different but parallel modernist dichotomy: between the technological (instrumental) and the ceremonial (institutional), with a priority assigned to the technological side. This priority appears clearly in the way Veblen describes the two sides of the dichotomy. He uses terms like "bare necessities of life" to describe technological consumption and "superfluities" or expenditures intended for "invidious pecuniary comparison" to describe ceremonial consumption (e.g., pp. 96-99). Underlying Veblen's consumption dichotomy and the prior status of technological consumption is the supposition that individuals have only two types of clearly distinguishable purposes in consumption: to meet their basic natural or biological needs and to artificially display their wealth. The dichotomy thus closely parallels that between the natural and the artificial.

There is an important difference, however, between Veblen and neoclassical economists in the way the "bad" side of the dichotomy achieves a lower status and enters into the analysis. Whereas the neoclassical approach narrows the analysis of consumption to the favored objective side by simply ignoring the subjective side, Veblen chooses to lower the status of ceremonial consumption by analyzing it critically. One can reveal a preference either by praising the better or by criticizing the worse; neoclassicals do the former, Veblen the latter. As a result, while the neoclassical theory sheds no light on consumption institutions, Veblen's framework at least highlights part of the picture by way of criticizing it. This difference also helps to explain why Veblen's framework has historically been more productive in the analysis of consumption institutions than the neoclassical framework and why it has remained critical of these institutions.

The final product is still incomplete, however. The dichotomy constrains the framework. It presumes that there are such things as basic needs that are clearly separable from social needs, reduces social needs to communication about only status, and then relegates them to a lower status as artificial. One can disagree with this reasoning at all levels. All needs are socially constructed; communication need not be solely about wealth and status; and even if one conceded the separability of needs, their priority (if any) would be assigned not by the economist but through social discourse. The dichotomy produces a narrow and incomplete perspective on consumption.

The question that remains is whether Veblen's framework can be usefully expanded to encompass the totality of consumption institutions. One approach might be to interpret Veblen's dichotomy in a weaker sense, as being simply a way of loosely distinguishing between different but overlapping aspects of consumption with no clear line of demarcation between them. One could then entertain the possibilities of, for example, the ceremonial nature of meeting "basic" needs or the instrumental nature of conspicuous consumption. Similarly, one could improve the framework by going beyond these two categories and incorporating other aspects of consumption. For example, as McIntyre (1992: 50) suggests, "[r]ather than symbols in a status system, commodities have increasingly come to be items of personal fulfillment." The framework could then be revised by replacing one of the categories or by adding a third one. Moreover, avoiding generalizations across motives or commodities, one could consider each form of consumption on its own. Fine and Leopold (1993: 22) propose such an approach in their work, arguing that "each commodity or commodity group is best understood in terms of a unity of economic and social processes which vary significantly from one commodity to another." One could then study the historical delineation of consumption institutions surrounding a specific commodity by examining such issues as the roles of different motives that do not necessarily have a preassigned ranking. These would indeed be worthwhile research projects that can import new insights into such an interpretation of Veblen.

The problem with this interpretation is that Veblen would not have accepted it. Veblen is very clear and insistent on his methodological position that posits the dichotomy in a strong sense and, importantly, assigns a higher status to technological consumption over the ceremonial. This is clear even as Veblen appears to explicitly grant the overlapping nature of the two sides of the dichotomy in the final paragraph of the section rifled "Conspicuous Consumption." He writes:

An article may be useful and wasteful both, and its utility to the consumer may be made up of use and waste in varying proportions. Consumable goods, and even productive goods, generally show the two elements in combination, as constituents of utility; although, in a general way, the element of waste tends to predominate in articles of consumption, while the contrary is true of articles designed for productive use. Even in articles which appear at first glance to serve for pure ostentation only, it is always possible to detect the presence of some, at least ostensible, useful purpose; and on the other hand, even in special machinery and tools contrived for some particular industrial process, as well as in the rudest appliances of human industry, the traces of conspicuous waste, or at least the habit of ostentation, usually become evident on a close scrutiny. (Veblen 1899: 100)

One can read this passage as suggesting a loose line of demarcation between the technological and ceremonial varieties of consumption. The distinction is now between productive and consumable goods with overlapping boundaries, as Veblen appears to be opening the door to the overlapping character of objects used in consumption. Hamilton (1987: 1547), for example, insists on this interpretation of Veblen when he argues that "[w]e use goods as symbols of status and simultaneously as instruments to achieve some end-in-view." While that may be true, the more relevant distinction is not solely between goods but between their categorization. The fact remains that Veblen maintains a rigid dichotomy between the productive (useful) and consumable (wasteful) categories themselves, even though the goods might overlap between them. Veblen still subscribes to a modernist dichotomy between the "natural" and the "artificial" as causing expenditures to be "useful" or "wasteful," with an obvious preference for the former of these oppositions.

Veblen's modernism can also be seen in his approach to science. Veblen sees a dichotomy between what he refers to as "efficient cause" and "sufficient reason," arguing that science relies on explanations from efficient cause.(5) As Langlois (1989: 278) states, the dichotomy "reflects an older dichotomy, going back to the Greeks, between what is 'artificial' and what is 'natural.' To say that something is artificial is to use sufficient reason: to explain it as (consciously) created by human will. To say that something is natural is to use efficient cause: to explain it as the result of physical laws and causes." We thus see a parallel between Veblen's dichotomies in consumption and in scientific explanation, both emanating from his modernism and reflecting the dichotomy between the natural and the artificial. Veblen saw himself as a partisan of the modernist scientific methodology of the late nineteenth century, favoring the natural and more fundamental "machine process" over the artificial and skeptical social categories. As Mirowski (1988: 123) argues, "[t]he fatal flaw in Veblen's portrayal of science was his desire to apotheosize it as the opposite pole to his otherwise withering skepticism; it was to be the one ideal not besmirched by the common self-delusion of social categories."

The question then becomes whether Veblen's approach to consumption can be fruitfully expanded while at the same time retaining his modernism. As the foregoing argument has made clear, the result would necessarily be a skeptical and critical approach to ceremonial (institutional) consumption and an incomplete account of consumption institutions. There is nothing wrong, of course, in being critical of one or another aspect of consumption in society. When the critical attitude is merely the result of a methodological conviction, however, all we have is a simplistic dichotomy replacing careful thought. Institutions might be usefully categorized as "good" or "bad" in specific contexts. But it is not clear how useful the categorization can be if all it does is to lump certain institutions together in one category on purely methodological grounds. Modernist dichotomies serve to only restrict understanding when they result from a methodological conviction that seeks to divide the word along a clear line of demarcation, favoring one side of the line over the other.

It is interesting that such modernist dichotomies have been variously criticized, yet they still survive in the minds of many economists implicitly or explicitly, consciously or unconsciously. As Booth (1974: 22) puts it, they "permeate our lives, destroy our thought, and defeat our efforts to engage productively in changing each other's minds." Modernist discourse in economics has had far reaching consequences. For example, it has been used to designate the approaches of other schools of thought as being "unscientific," thus unworthy of attention. As Amariglio, Resnick, and Wolff (1990: 116) put it, modernism "has been an extremely useful weapon in allowing one school of thought to characterize the differences between it and others as one of truth versus falsity, rigor versus error, modification versus deviation, and so forth." More important for our purposes, modernism has so far been responsible in excluding consumption institutions from the domain of neoclassical economics and in preventing Veblen and others from examining these institutions adequately.(6) For a more adequate approach, we thus need to move beyond modernism and simplistic dichotomies.

THE RHETORICAL PERSPECTIVE: AN ANALOGY BETWEEN SPEECH AND CONSUMPTION

One of the most forceful criticisms of modernist methodology has come from the rhetorical perspective, recently introduced to economics by Klamer and McCloskey (Klamer 1983; McCloskey 1985, 1990, 1994; and Klamer, McCloskey, and Solow, eds. 1988). Rhetoric deals with the way people argue with and understand each other. Whereas modernism prescribes to the economist certain methodological rules that seek to demarcate scientific propositions from nonscientific ones, the rhetorical perspective views propositions as being part of an ongoing conversation about the economy that have to observe conversational, not methodological, rules in order to be persuasive. Each economist takes part in this conversation, speaking with designs on the audience and using a variety of rhetorical devices, such as analogies and appeals to authority, to persuade other participants.

The rhetorical perspective thus rejects the need and possibility of rigid methodological criteria that can demarcate propositions into two halves and that can choose one side over the other. Such an exercise would be pointless in scholarly discourse. As McCloskey (1985: 43) puts it, "[p]eople are persuaded of things in many ways.... It is not clear why they should labor at drawing lines on mental maps between one way or another." Though many have tried, and still continue to do so, modernist attempts to evaluate and demarcate propositions by solely methodological rules have proven a failure. "Modernists have long faced the embarrassment that metaphor, case study, upbringing, authority, introspection, simplicity, symmetry, fashion, theology, and politics apparently serve to convince scientist as well as they do other folk" (McCloskey 1985: 43).

The rhetorical perspective is also useful in going beyond the modernist dichotomies employed by Veblen and neoclassical economists and in developing an alternative framework to understand consumption behavior and institutions. The first step in developing this framework is to shift the focus of the rhetorical perspective away from the economists' conversation about the economy and to place it on the individuals' conversation in the economy.(7) As McCloskey (1994: 367) also suggests, "the economic actor, too, is a scientist.... That is, the economy, like economics itself, is a conversation." In a variety of economic activities, such as bargaining for a car, negotiating a wage contract, starting a new company, and borrowing money from a bank, individuals take part in this conversation, utilizing a variety of rhetorical devices to persuade others.

The next step is to focus on consumption activities by making an analogy between speech and consumption. The analogy proposed here combines the rhetorical perspective with the view of goods as a system of communication (Douglas and Isherwood 1979). That is, in a manner analogous to (verbal or written) speech, items of personal consumption also make statements. A consumer's emotions, personality, age, wealth, and so on find expression in a consumption bundle. Moreover, from a rhetorical perspective to communication, the discourse of consumption can be interpreted as being oriented toward the persuasion of an audience. Analogous to speech, consumption practices utilize a variety of rhetorical devices, such as analogies and appeals to authority, to persuade others. For example, the choices of blue for boys and pink for girls invoke an analogy between colors and gender, and a teenager might emulate rock stars in consumption decisions as an appeal to their authority.(8)

Before we proceed to exploring the implications of the analogy for understanding consumption institutions, let us first take note of the criticisms of McCloskey's approach to the rhetoric of economics. Some of these criticisms, made in the context of discourse in economics, have implications for properly extending the perspective to the context of discourse in consumption. The criticism most relevant to the proposed analogy between speech and consumption has to do with McCloskey's ideal of a free market for ideas. As Stetler (1995:391) has recently argued, at the heart of McCloskey's argument "is an analogy according to which discourse in economics is like a market for ideas. That analogy thus justifies established paradigms [in economics] despite the rejection of their methodological underpinnings." Whereas this criticism is directed primarily at McCloskey's view of markets, it also raises issues about the structure of markets and the analogical structure of discourse in economics.(9)

From the present emphasis on institutions, the criticism calls attention to the institutional structure of discourse. Whereas McCloskey calls for a free market for ideas, the fact remains that discourse in economics is both enabled and constrained by a variety of socially constructed, if not methodologically prescribed, institutions. For example, economic discourse is surrounded by institutions such as the schools of thought, systems of academic rank and tenure, disciplinary networks with established power relationships, and the refereeing systems in the publication process. Because some of these institutions serve as "entry barriers" to some types of arguments (e.g., by limiting the participation of, for example, the Marxists, feminists, institutionalists, and social economists into the mainstream journals) and as promoters of other types, discourse in economics must be examined in its institutional setting. Freedom of speech by itself does not guarantee one's participation, understanding, and acceptance in discourse.

It follows from the speech-consumption analogy that discourse in consumption should also be examined in the same setting, which has been the focus here all along.(10) Just as conversation cannot take place without an institutional structure, consumption cannot take place in an institutional vacuum. These criticisms thus also indirectly suggest that we explore the parallels between the institutions of speech and consumption.

THE AUDIENCE AND THE INSTITUTIONS OF SPEECH AND CONSUMPTION

One of the implications of the rhetorical perspective is the emphasis on the role of the audience. The communication of a message, after all, requires its reception by an audience, in both speech and consumption. What the speaker encodes, the audience must decode. Thus, the speaker (consumer) must consider the reception of the audience in the selection of words (goods) in order to communicate the message or to carry out an intelligible conversation. As Klamer and McCloskey (1988: 9) put it, "there must be a sender/encoder sending a message to a receiver/decoder."

But there must also be institutions. Both encoding and decoding require at least an explicit mastery of a code and the knowledge of a variety of other social institutions that facilitate communication. To see this, imagine being in a foreign land with no prior knowledge of its social institutions surrounding communication (or, imagine being stripped of all institutional memory in your own land). Without acquiring the institutional background, you simply cannot communicate with its inhabitants. Communication does not take place in a vacuum. You would need to know this land's institutions that enable and constrain the formulation of statements in both speech and consumption.

In speech, one needs to learn this land's language and the shared rules governing its situated use. That is, one needs to know not only the way vocabulary, syntax, and grammar organize the language, but also the way speech acts, metaphorical representations, story structures, and pragmatic codes work to produce meanings in this culture. Moreover, faced with different audiences, one needs to know regularities in the shared beliefs and reference points of each particular audience. Only then will speech construct meanings and produce intelligible communication through speaker-audience relationships.

In consumption, one similarly needs to learn the "language" of goods in this culture and the shared rules governing their situated use. One needs to know the variety of goods available in the culture and the rules that regulate the arrangement of goods in the production of meanings. For example, different properties (e.g., colors, dimensions, and contents) of goods might combine to produce meanings about age, gender, values, and social roles that a foreigner would not know. Moreover, the meanings might change with particular audiences, based on differences in their shared beliefs and reference points. In choosing goods, a foreigner in this land would thus need to know about its consumption institutions in order to communicate intelligibly.

The example of being in a foreign land might give the impression of institutions as being pre-given to the individual. This, of course, is not the case in general. Whereas some institutions (e.g., property rights) might be external and given to an individual, others (e.g., habits) are more in the nature of tacit, skill-like behavior that are the properties of individuals themselves. Institutions have also been variously categorized to distinguish between, for example, organic versus pragmatic institutions and spontaneous orders versus conscious designs.(11) As suggested earlier, however, consumption institutions cut across these categories. The more important question that concerns us here is their function: how do consumption institutions facilitate communication?

CONSUMPTION INSTITUTIONS PROVIDE KNOWLEDGE

Institutional economists have shown the variety of complex functions that institutions perform in society. For example, they can influence behavior, produce order, help to exclude or exert power on others, coordinate interests, and promote, organize, and regulate economic activities. The key function of institutions that needs emphasis in the context of consumption is their capacity to provide knowledge. Consumption institutions facilitate communication by providing knowledge for the consumer to send and the audience to interpret messages. The idea that institutions carry knowledge is one of the recent achievements of the economics of institutions. As a typical example, consider the choice of which side of the road to drive on. The convention (required by law but also self-enforcing for obvious reasons) that drivers use the right-hand side of the road eliminates the problem that each driver would otherwise face of having to learn the lane preferences of others. By providing a stable structure and making the behavior of others more predictable, institutions reduce uncertainty and guide human relationships.

The same is true for consumption institutions. But, because of the different roles of the consumer and the audience in their relationship, consumption institutions serve a dual function. In the first, in order for the consumer to encode messages effectively, institutions provide knowledge to the consumer about the meanings of goods. Because meaning is always meaning to someone, however, this amounts to providing knowledge about audience perceptions of and reactions to goods. In the second, they provide the knowledge about the meanings of goods to the audience, knowledge that they need in order to interpret messages encoded in goods. By providing knowledge about goods, consumption institutions regulate both the encoding and the decoding of messages.

As regulators, consumption institutions serve as both constraints and enablers. As constraints, they restrict the range of choices for the consumer in encoding a message and the range of interpretations of the message by the audience. For example, a consumer is not at liberty to express a state of casualness by wearing a formal necktie. Similarly, the audience is not at liberty to interpret the same necktie rather as a sign of such things as marital status, a religious preference, or a concern for the environment. Institutions include both formal and informal rules that constrain the range of choices for consumers and their audiences.

Because they are constraints, consumption institutions are meaningful. They set the parameters of communication by ordering the environment and restricting interpretations to shared categories. What matters for these institutions is not so much that everyone agrees with or always follows them, but that they simply exist to define meaning. Their existence provides a shared frame of reference and a common ground for communication. By constraining both ends of the communication channel in the same way, they allow consumers to use goods to stand for the same meaning as understood by the audience.

As constraints, therefore, consumption institutions also serve as enablers. They enable communication by "abbreviating" the knowledge that individuals need to consider in order to encode and decode messages. That is, by restricting the range of choices and channeling them to a smaller set, they improve the abilities of the consumer to send messages and of the audience to understand them. Because constraints can substitute for extensive reasoning and deliberation, less effort is required to communicate and to generate meanings that elicit desired reactions.

One way to understand the enabling function of consumption institutions is to view them as solutions to the problem of bounded rationality (Simon 1982). Imagine a society in which everyone has perfect knowledge of everyone else and unlimited powers to reason. In that case, each consumer would know the preferences, beliefs, and interpretive categories of his or her audience; the audience would know the way statements in the consumer's mind are encoded in goods; and both would be able to adequately process and utilize this knowledge for effective behavior. But the possibility of such a society is constrained by the human capacity to learn, reason, and remember.

Given these constraints, consumption institutions evolve to assist individuals to cope with uncertainty and communicate intelligibly. Individuals who have only limited knowledge of others can nevertheless relate to each other through intersubjectively shared categories of communication that institutions supply. In making clothing choices for a professional meeting, for example, no knowledge about other participants or extensive deliberations are required: all that one needs to know has been institutionalized in clothing conventions. Consumption institutions reduce the dimensions of our problems of choice. They simplify the process by filtering and condensing the required knowledge and by carrying it across time as memory. No individual has to start from scratch or place unreasonable demands on his or her cognitive powers. One can simply submit to consumption institutions to cope with the uncertainty surrounding consumption choices and to interpret the choices of others.

Three caveats are necessary to clarify the argument further. First, recognizing the enabling feature of consumption institutions is not meant to undermine their repressiveness. Sometimes, institutional rules serve more as repressive constraints than enablers, when they are imposed on individuals who would rather not follow them. At other times, they are more enabling than repressive, when they reflect collective manifestation of a general will. Although the relative weights of enabling and repressive features of institutions might change in different contexts, the emphasis here is simply on their symmetric coexistence and the way consumption institutions, both as enablers and constraints, function to provide knowledge.

Second, the argument does not imply that consumption institutions are always efficient. In fact, as North (1990: 16) also argues, "[i]nstitutions are not necessarily or even usually created to be efficient." They are products of historical processes that do not necessarily include an evolutionary competition which can yield only efficient outcomes after the inefficient ones have been weeded out. The way institutions provide solutions to problems is an issue that has to be separated from the issue of the efficiency of these solutions. The efficiency of the way consumption institutions provide knowledge is an issue that is not pursued here.

Finally, emphasizing the rule-like aspects of consumption institutions does not imply that everyone does or should always conform to all rules and conventions. Note, however, that even conscious nonconformism to a convention makes a statement. When one wears casual clothing in a formal party, for example, one makes a statement. Similarly, when a teenager blatantly carries around an illegal gun, he or she makes a statement. When one breaks an established rule, one intends to send a message understanding of which requires the existence of the rule itself. That is, the message is meaningful only if there is a presumed understanding of what it means to break the rule, supporting the contention that constraints carry meaning. The rules of disobedience to consumption institutions are defined by these very institutions. Although any rule can be broken for effect, going against the rule presumes and utilizes the knowledge embedded in an institution.

CONCLUSION

Recent developments in rhetorical analysis and the economics of institutions offer a way to go beyond simplistic dichotomies and to better understand consumption institutions. Using an analogy between speech and consumption, this paper explored parallels between the institutions that surround them. Just as a speaker utilizes speech institutions (e.g., language, speech codes), a consumer utilizes a variety of consumption institutions (e.g., the meanings produced by specific arrangements of goods, dress codes) in making statements. Consumption institutions serve as both constraints and enablers, providing the knowledge that assist individuals to relate to each other through intersubjectively shared categories of communication. They serve a dual function by providing knowledge for the consumer to send and the audience to interpret messages.

ACKNOWLEDGMENTS

I wish to thank Jack Amariglio, Arjo Klamer, Richard Langlois, Thomas Leonard, Deirdre McCloskey, and Mufit Sabooglu for comments on an earlier draft. I also wish to thank the editor and the referees of the Review for useful comments and suggestions.

1 See Lower (1980) and Hamilton (1987) for a review of the institutionalist theory of consumption.

2 For an example of works that also emphasize instrumental consumption, see Hamilton (1962).

3 See also Mason's (1981) interpretation of Veblen's concept of "conspicuous consumption" and its review by Hamilton (1983).

4 See also their review of the economists' self-criticisms of their consumption theory, on pp. 19-24.

5 See Langlois (1989) for a detailed discussion of this dichotomy and Veblen's views on science.

6 For discussions of similar issues within Marxist thought, see Amariglio and Callari (1989) and Milberg and Pietrykowski (1994).

7 Several works have utilized such a focus. See Cosgel (1992, 1994) for different implications of consumption viewed from a rhetorical perspective; Cosgel and Klamer (1990) for a theory of the entrepreneur as a persuader; Horwitz (1992) for the metaphor of money as a means of communication; and Pietrykowski (1995) for market exchange as a set of communicative practices. See also Cosgel (1996) for the use of the rhetorical perspective in understanding the role of the entrepreneur in economics,

8 See Cosgel (1992: 367-369) for further examples.

9 For examples of other criticisms of McCloskey's approach, see some of the contributions to Klamer, McCloskey, and Solow (1988) and to the special issue of Economics and Philosophy, (1988), 4(2). See also McCloskey (1994: Part V) for McCloskey's answers to some of these criticisms.

10 Interpreting the rhetorical approach as a variant of poststructuralist theory, Milberg and Pietrykowski (1994) examine production and consumption around the notion of "transsubjectivity," also calling attention to the institutional dimension in social structures.

11 For a discussion of these categories, see Langlois (1993).

REFERENCES

Adams, Roy D. and McCormick, Ken (1992) "Fashion Dynamics and the Economic Theory of Clubs," Review of Social Economy 50(1): 24-39.

Amariglio, Jack, Resnick, Stephen, and Wolff, Richard (1990) "Division and Difference in the 'Discipline' of Economics," Critical Inquiry 17: 108-137.

Amariglio, Jack and Callari, Antonio (1989) "Marxian Value Theory and the Problem of the Subject: The Role of Commodity Fetishism," Rethinking Marxism 2(3): 31-60.

Booth, Wayne C. (1974) Modern Dogma and the Rhetoric of Assent, Chicago: The University of Chicago Press.

Campbell, Colin (1994) "Consuming Goods and the Good of Consuming," Critical Review 8(4): 503-520.

Cosgel, Metin M. (1992) "Rhetoric in the Economy: Consumption and Audience," Journal of Socio-Economics 21: 363-377.

----- (1994) "Audience Effects in Consumption," Economics and Philosophy 10: 19-30.

----- (1996) "Metaphors, Stories, and the Entrepreneur in Economics," History of Political Economy 28(1): 57-76.

Cosgel, Metin M. and Klamer, Arjo (1990) "Entrepreneurship as Discourse," Unpublished Manuscript.

Douglas, Mary and Isherwood, Baron (1979) The Worm of Goods, New York: Basic Books.

Duesenberry, James S. (1949) Income, Saving, and the Theory of Consumer Behavior, Cambridge, MA: Harvard University Press.

Dugger, William (1985) "The Analytics of Consumption Externalities," Review of Social Economy 43(3): 212-233.

Fine, Ben and Leopold, Ellen (1993) The World of Consumption, New York: Routledge.

Frank, Robert H. (1985) Choosing the Right Pond.' Human Behavior and the Quest for Status, Oxford: Oxford University Press.

Hamilton, David B. (1962) The Consumer in Our Economy, Boston: Houghton Mifflin Company.

----- (1983) "Review of R. S. Mason: Conspicuous Consumption: A Study of Exceptional Consumer Behavior," Journal of Economic Issues 17(3): 791-796.

---- (1987) "Institutional Economics and Consumption," Journal of Economic Issues 21(4): 1531-1554.

Horwitz, Steven (1992) "Monetary Exchange as an Extra-Linguistic Social Communication Process," Review of Social Economy 50(2): 193-214.

Klamer, Arjo (1983) Conversations with Economists, Totowa: Rowman and Allanheld.

Klamer, Arjo, McCloskey, Donald N., and Solow, Robert (eds.) (1988) The Consequences of Economic Rhetoric, New York: Cambridge University Press.

Klamer, Arjo and McCloskey, Donald N. (1988) "Economics in the Human Conversation," in A. Klamer, D. McCloskey, and R. Solow (eds.) The Consequences of Economic Rhetoric, New York: Cambridge University Press.

Langlois, Richard N. (1989) "What was Wrong with the Old Institutional Economics (and What is Still Wrong with the New)?" Review of Political Economy 1(3): 270-298.

----- (1993) "Orders and Organizations: Toward an Austrian Theory of Social Institutions," in B. Caldwell and S. Bohm (eds.) Austrian Economics: Tensions and new Directions, Dordrecht: Kluwer Academic Publishers.

Leibenstein, Harvey (1950) "Bandwagon, Snob, and Veblen Effects In The Theory of Consumers' Demand," Quarterly Journal of Economics 64: 183-207.

Lower, Milton D. (1980) "The Evolution of the Institutionalist Theory of Consumption," in J. Adams, (ed.) Institutional Economics, Boston: Martinus Nijhoff Publishing.

McCloskey, Donald N. (1985) The Rhetoric of Economics, Madison: The University of Wisconsin Press.

----- (1990) If You're So Smart: The Narrative of Economic Expertise, Chicago: The University of Chicago Press.

----- (1994) Knowledge and Persuasion in Economics, Cambridge: Cambridge University Press.

McIntrye, Richard. (1992) "Consumption in Contemporary Capitalism: Beyond Marx and Veblen," Review of Social Economy 50(1): 40-60.

McPherson, Michael S. (1983) "Want Formation, Morality, and Some 'Interpretive' Aspects of Economic Inquiry," in N. Haan, R. N. Bellah, P. Rabinow, and W. M. Sullivan (eds.) Social Science as Moral Inquiry, New York: Columbia University Press.

Mason, Roger S. (1981) Conspicuous Consumption: A Study of Exceptional Consumption Behavior, New York: St. Martin's Press.

Milberg, William S. and Pietrykowski, Bruce A. (1994) "Objectivism, Relativism and the Importance of Rhetoric for Marxist Economics," Review of Radical Political Economics 26(1): 85-109.

Mirowski, Philip (1988) Against Mechanism: Protecting Economics from Science, Totowa, NJ: Rowman and Littlefield.

North, Douglass C. (1990) Institutions, Institutional Change and Economic Performance, Cambridge: Cambridge University Press.

Pietrykowski, Bruce (1995) "Beyond Contested Exchange: The Importance of Consumption and Communication in Market Exchange," Review of Social Economy 53(2): 215-241.

Simon, Herbert. (1982) Models of Bounded Rationality, Cambridge, MA: MIT Press.

Spence, Michael A. (1974) Market Signaling: Informational Transfer in Hiring and Related Screening Processes, Cambridge, MA: Harvard University Press.

Stetler, Michael (1995) "The Rhetoric of McCloskey's Rhetoric of Economics," Cambridge Journal of Economics 19: 391-403.

Stigler, George J. and Becker, Gary S. (1977) "De Gustibus Non Est Disputandum," American Economic Review 67 (2): 76-90.

Veblen, Thorstein (1899) The Theory of The Leisure Class, New York: Penguin Books.

Document Number: A20057450